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Self-Directed and Online Investing Market Research - US - September 2012

What the Self-Directed and Online Investing Market Research Report Covers

This study is a comprehensive look at the U.S. self-directed investing industry, with a particular spotlight on the competitive landscape, consumer behaviors and attitudes, growth trends and drivers, and marketing strategies.

What you need to know:

  • How big is the self-directed investment business, and how many consumers have these accounts?
  • What are the biggest challenges facing the self-directed investment industry, and what are the greatest opportunities?
  • Who are the leading companies in this business, and what are they doing to attract customers?
  • What are the most attractive customer niches for self-directed investment firms?
  • What are some of the services that consumers expect from their investment providers?

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer study data
            • Abbreviations and terms
              • Terms
                • Companies mentioned in this report:
                • Executive Summary

                    • The market
                      • U.S. retirement market totals $15.3 trillion at year-end 2011
                        • Figure 1: Percentage share of U.S. consumer retirement assets, by account type, 2011
                      • IRA market share grows against competing retirement plans
                        • Figure 2: Percentage share of U.S. consumer retirement assets, by account type, 2006-11
                      • Lots of opportunities, but many Americans don’t have money to invest
                        • Figure 3: Net worth and disposable personal income of U.S. households, 2007–Q1 2012
                      • Population trends are positive for investment industry
                        • Figure 4: Projected percentage of U.S. population aged 65+, 2010-50
                      • The consumer
                        • About one third have a self-directed account, but few trade frequently
                          • Figure 5: Incidence of self-directed account ownership and frequency of trading activity, by gender, May 2012
                        • Consumers like to manage their own accounts, think pros charge too much
                          • Figure 6: Reasons for choosing to manage own investments, May 2012
                        • Online is most popular investing channel, but branches are still popular
                          • Figure 7: Communication methods used in managing account(s), May 2012
                        • Mutual funds and stocks are most popular investments
                          • Figure 8: Types of financial products in self-directed account(s), May 2012
                        • Fidelity is most popular investment firm, but young people like Wells Fargo
                          • Figure 9: Location of self-directed account(s), May 2012
                        • High frequency traders less likely to look to an adviser for ideas
                          • Figure 10: Importance of sources of financial information (Very or Somewhat important), May 2012
                        • Hispanics are an attractive—and growing—customer niche
                          • Figure 11: Frequency of trading in self-directed account, by race/Hispanic origin, May 2012
                        • New products and innovations
                          • Investment firms offer new features
                            • Investment companies are offering big bounties to attract customers
                              • What we think
                              • Issues in the Market

                                  • The biggest challenge facing the self-directed investment industry
                                    • IRAs are largest market segment
                                      • Demographic trends will impact the market in coming years
                                        • Why do people choose to invest on their own?
                                        • Insights and Opportunities

                                          • Key points
                                            • Branch offices are still important to online investors
                                              • Blacks are grossly underrepresented as investment customers
                                                • Investment firms need to help promote financial literacy
                                                • Trend Applications

                                                    • Trend: The Nouveau Poor
                                                      • What we’ve seen
                                                        • Industry application
                                                          • Trend: Help Me Help Myself
                                                            • What we’ve seen
                                                              • Industry application
                                                                • Trend 2015: Access Anything, Anywhere
                                                                  • What we’ve seen
                                                                    • Industry application
                                                                    • Market Size

                                                                      • Key points
                                                                        • U.S. retirement market totals $15.3 trillion at year-end 2011
                                                                          • Figure 12: Total dollars in U.S. consumer retirement assets, by account type, 2006-11
                                                                        • IRA market share grows against competing retirement plans
                                                                          • Figure 13: Share of U.S. consumer retirement assets, by account type, 2006-11
                                                                        • Most IRA assets are held at mutual funds, but other firms are gaining
                                                                          • Figure 14: Individual retirement account assets, by institution type, 2006-11
                                                                        • ETFs are growing in popularity, pass $1 trillion mark
                                                                          • Figure 15: Total assets in mutual funds, ETFs closed-end funds, and UITs, 2006-11
                                                                      • The Consumer, the Economy, and Retirement

                                                                        • Key points
                                                                          • Lots of opportunities, but where will the money come from?
                                                                              • Figure 16: U.S. personal savings rate, 2005-Q1 2012
                                                                              • Figure 17: U.S. real disposable personal income, 2005-Q1 2012
                                                                              • Figure 18: U.S. rate of unemployment, 2008-July 2012
                                                                          • Segment Performance

                                                                            • Key points
                                                                              • Americans’ net worth falls 5% since 2007
                                                                                  • Figure 19: U.S. household balance sheet, 2007–Q1 2012
                                                                                • Student debt is growing even for older Americans
                                                                                  • Financial assets are growing feebly
                                                                                  • Market Drivers

                                                                                    • Key points
                                                                                      • Population trends bode well for investment industry
                                                                                          • Figure 20: U.S. population projections by age groups, 2010-50
                                                                                          • Figure 21: U.S. population projections by age groups, by percent share of population, 2010-50
                                                                                        • Life expectancy expected to rise by nearly five years by 2050
                                                                                          • Figure 22: U.S. life expectancy in years, 2010-50
                                                                                          • Figure 23: U.S. family income, by race/Hispanic origin, 2009
                                                                                      • Leading Companies

                                                                                        • Key points
                                                                                          • Figure 24: Leading investment companies, ranked by AUM
                                                                                        • Charles Schwab
                                                                                          • Vanguard
                                                                                            • Fidelity
                                                                                              • TD Ameritrade
                                                                                                • E*TRADE
                                                                                                  • Scottrade Inc.
                                                                                                    • ShareBuilder from ING Direct (Capital One)
                                                                                                      • Bank of America/Merrill Edge
                                                                                                        • USAA
                                                                                                        • Innovation and Innovators

                                                                                                          • Key points
                                                                                                            • Scan a product barcode, then buy the stock
                                                                                                              • E*TRADE launches voice recognition capability for iPhone
                                                                                                                • Investment firms offer more mobile phone options
                                                                                                                  • Schwab holds contest to encourage investment rather than impulse spending
                                                                                                                    • Schwab launches idea-generation tool for options traders
                                                                                                                    • Marketing Strategies

                                                                                                                      • Key points
                                                                                                                        • Investment companies paying big cash bounties for new customers
                                                                                                                          • Representative direct and electronic mail advertising
                                                                                                                            • TD Ameritrade Account from TD Ameritrade
                                                                                                                              • Figure 25: TD Ameritrade direct mail advertisement, April 2012
                                                                                                                            • IRA from TD Ameritrade
                                                                                                                              • Figure 26: TD Ameritrade direct mail advertisement, May 2012
                                                                                                                            • No-Fee IRA from Fidelity
                                                                                                                              • Figure 27: Fidelity IRA direct mail advertisement, April 2012
                                                                                                                            • IRA account from ING
                                                                                                                              • Figure 28: ING IRA email advertisement, January 2012
                                                                                                                            • Merrill Edge IRA
                                                                                                                              • Figure 29: Merrill Edge IRA direct mail advertisement, February 2012
                                                                                                                            • IRA bonus award from Charles Schwab
                                                                                                                              • Figure 30: Charles Schwab IRA direct mail advertisement, March 2012
                                                                                                                            • E*TRADE Mobile from E*TRADE
                                                                                                                              • Figure 31: E*TRADE Mobile email advertisement, December 2011
                                                                                                                            • Way2Save retirement account from Wells Fargo
                                                                                                                              • Figure 32: Wells Fargo retirement account direct mail advertisement, March 2012
                                                                                                                            • MoneyWhys Talk from Vanguard Group
                                                                                                                              • Figure 33: Vanguard retirement planning webinar email advertisement, December 2011
                                                                                                                            • Television and other advertising
                                                                                                                              • Charles Schwab
                                                                                                                                • Vanguard
                                                                                                                                  • Fidelity
                                                                                                                                    • E*TRADE
                                                                                                                                      • Merrill Edge
                                                                                                                                        • Scottrade
                                                                                                                                        • Who Has Self Directed Accounts?

                                                                                                                                          • Key points
                                                                                                                                            • About one third of respondents have a self-directed account
                                                                                                                                              • Figure 34: Incidence of self-directed account ownership, by gender, May 2012
                                                                                                                                            • Having a self-directed account tends to rise with age
                                                                                                                                              • Figure 35: Incidence of self-directed account ownership, by age, May 2012
                                                                                                                                            • Having an investment account rises with income also
                                                                                                                                              • Figure 36: Incidence of self-directed account ownership, by household income, May 2012
                                                                                                                                            • Less than 20% of blacks have accounts, half the rate among whites
                                                                                                                                              • Figure 37: Incidence of self-directed account ownership, by race/Hispanic origin, May 2012
                                                                                                                                            • Having an investment account varies by region
                                                                                                                                              • Figure 38: Incidence of self-directed account ownership, by region, May 2012
                                                                                                                                          • Most Investors Trade Infrequently

                                                                                                                                            • Key points
                                                                                                                                              • Men are more often high frequency traders
                                                                                                                                                • Figure 39: Frequency of trading in self-directed account, by gender, May 2012
                                                                                                                                              • Youngest investors are the most frequent traders
                                                                                                                                                • Figure 40: Frequency of trading in self-directed account, by age, May 2012
                                                                                                                                              • Trading frequency increases with income, but not substantially
                                                                                                                                                • Figure 41: Frequency of trading in self-directed account, by household income, May 2012
                                                                                                                                              • Midwesterners are least frequent traders
                                                                                                                                                • Figure 42: Frequency of trading in self-directed account, by region, May 2012
                                                                                                                                            • Choosing an Investment Company

                                                                                                                                              • Key points
                                                                                                                                                • Fidelity is the most popular investment firm for two straight years
                                                                                                                                                  • Figure 43: Location of self-directed account(s), by gender, May 2012
                                                                                                                                                • Wells Fargo ranks highly among younger investors
                                                                                                                                                  • Figure 44: Location of self-directed account(s), by age, May 2012
                                                                                                                                                • Income seems to play little role in company choice
                                                                                                                                                  • Figure 45: Location of self-directed account(s), by household income, May 2012
                                                                                                                                                • Wells Fargo is popular in the South, West
                                                                                                                                                  • Figure 46: Location of self-directed account(s), by region, May 2012
                                                                                                                                                • Low prices, research tools are most important features for investors
                                                                                                                                                  • Figure 47: Reasons for choosing an investment firm, all respondents, May 2012
                                                                                                                                                  • Figure 48: Reasons for choosing an investment firm, by gender, May 2012
                                                                                                                                                • Low prices, investing tools more important to youngest group
                                                                                                                                                  • Figure 49: Reasons for choosing an investment company, by age, May 2012
                                                                                                                                                  • Figure 50: Reasons for choosing an investment company, by household income, May 2012
                                                                                                                                                • Southerners place more importance on prices and research tools
                                                                                                                                                  • Figure 51: Reasons for choosing an investment company, by region, May 2012
                                                                                                                                                • Prices, research more critical to high frequency traders
                                                                                                                                                  • Figure 52: Reasons for choosing an investment company, by frequency of trading, May 2012
                                                                                                                                              • Communication Channels for Account Management

                                                                                                                                                • Key points
                                                                                                                                                  • Online is most popular channel, but branch offices still seem necessary
                                                                                                                                                    • Figure 53: Communication methods used in managing account(s), by gender, May 2012
                                                                                                                                                  • Oldest investors prefer traditional channels
                                                                                                                                                    • Figure 54: Communications methods used in managing account(s), by age, May 2012
                                                                                                                                                  • Income has little influence on channel preference
                                                                                                                                                    • Figure 55: Communications methods used in managing account(s), by household income, May 2012
                                                                                                                                                  • Northeasterners more likely to prefer traditional channels
                                                                                                                                                    • Figure 56: Communications methods used in managing account(s), by region, May 2012
                                                                                                                                                  • High-volume traders prefer electronic channels
                                                                                                                                                    • Figure 57: Communications methods used in managing account(s), by frequency of trading in self-directed account, May 2012
                                                                                                                                                • Mutual Funds and Stocks Most Popular Investments

                                                                                                                                                  • Key points
                                                                                                                                                    • Investors prefer mutual funds and stocks
                                                                                                                                                      • Figure 58: Types of financial products in self-directed account(s), by gender, May 2012
                                                                                                                                                    • Younger people attracted to riskier investments
                                                                                                                                                      • Figure 59: Types of financial products in self-directed account, by age, May 2012
                                                                                                                                                    • Highest-income groups diversify their investments
                                                                                                                                                      • Figure 60: Types of financial products in self-directed account, by household income, May 2012
                                                                                                                                                  • Investors are Confident in Their Abilities

                                                                                                                                                    • Key points
                                                                                                                                                      • Consumers like to manage their own accounts
                                                                                                                                                        • Figure 61: Reasons for choosing to manage own investments, by gender, May 2012
                                                                                                                                                      • Reasons for investing vary with age
                                                                                                                                                        • Figure 62: Reasons for choosing to manage own investments, by age, May 2012
                                                                                                                                                      • High-income people enjoy investing more
                                                                                                                                                        • Figure 63: Reason for choosing to manage own investments, by household income, May 2012
                                                                                                                                                    • Sources of Financial Information

                                                                                                                                                      • Key points
                                                                                                                                                        • Investors tap a variety of news and information sources
                                                                                                                                                          • Figure 64: Importance of sources of financial information, May 2012
                                                                                                                                                          • Figure 65: Importance of sources of financial information—Any important, by gender, May 2012
                                                                                                                                                        • Youngest investors rely more heavily on all news sources
                                                                                                                                                          • Figure 66: Importance of sources of financial information—any important, by age, May 2012
                                                                                                                                                        • News consumption doesn’t vary with income
                                                                                                                                                          • Figure 67: Importance of sources of financial information—any important, by household income, May 2012
                                                                                                                                                        • Frequent traders are heavy news consumers
                                                                                                                                                          • Figure 68: Importance of sources of financial information, by frequency of trading, May 2012
                                                                                                                                                      • Custom Consumer Groups—Hispanic Investors

                                                                                                                                                        • Key points
                                                                                                                                                          • Hispanics make excellent investment customers
                                                                                                                                                            • Hispanics are high-frequency traders
                                                                                                                                                                • Figure 69: Frequency of trading in self-directed account, by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics tend to invest in riskier assets
                                                                                                                                                                • Figure 70: Types of financial products owned in self-directed account, by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics have confidence in their investment abilities
                                                                                                                                                                • Figure 71: Reason for choosing to manage own investments, by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics use tools provided by their investment firm
                                                                                                                                                                • Figure 72: Reasons for choosing to manage own investments, by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics favor both modern and traditional communications
                                                                                                                                                                • Figure 73: Communications methods used in managing account(s), by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics devour financial news from all sources
                                                                                                                                                                • Figure 74: Importance of sources of financial information—any important, by race/Hispanic origin, May 2012
                                                                                                                                                              • Hispanics favor the best-known investment firms
                                                                                                                                                                  • Figure 75: Location of self-directed account, by race/Hispanic origin, May 2012
                                                                                                                                                              • Frequent Trader Profile

                                                                                                                                                                  • Figure 76: Frequent trader profile, May 2012
                                                                                                                                                              • Appendix—Trade Associations

                                                                                                                                                                Companies Covered

                                                                                                                                                                • Apple, Inc
                                                                                                                                                                • Bank of America Corporation
                                                                                                                                                                • Capital One Financial Corporation
                                                                                                                                                                • Charles Schwab Corporation
                                                                                                                                                                • Citigroup Inc.
                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                • FMR Corp.
                                                                                                                                                                • Google, Inc.
                                                                                                                                                                • ING Direct
                                                                                                                                                                • JPMorgan Chase & Co
                                                                                                                                                                • Merrill Lynch & Co. Inc
                                                                                                                                                                • Scottrade Inc.
                                                                                                                                                                • ShareBuilder Corp.
                                                                                                                                                                • State Farm Insurance Companies
                                                                                                                                                                • TD Ameritrade Holding Corporation
                                                                                                                                                                • TD Waterhouse
                                                                                                                                                                • The Vanguard Group, Inc.
                                                                                                                                                                • Twitter, Inc.
                                                                                                                                                                • USAA
                                                                                                                                                                • Wells Fargo & Company

                                                                                                                                                                Self-Directed and Online Investing Market Research - US - September 2012

                                                                                                                                                                £3,199.84 (Excl.Tax)